ZOLINA, ZANDRIX WEN B.

PCEIT-03-301P 8/29/2022

Define the following financial terms

1. Fixed Cost - Fixed costs are costs that are independent of volume. Fixed costs tend to be
costs that are based on time rather than the quantity produced or sold by your business.
Examples of fixed costs are rent and lease costs, salaries, utility bills, insurance, and loan
repayments.

2. Variable Cost - A variable cost is a recurring cost that changes in value according to the rise
and fall of revenue and output level. Variable costs include credit card fees and shipping
costs.

3. Incremental Cost - Incremental cost is the total cost incurred due to an additional unit of
product being produced. Incremental cost is calculated by analyzing the additional expenses
involved in the production process, such as raw materials, for one additional unit of
production.

4. Recurring Cost - Recurring expenses are the company's ongoing costs. These can include
administrative costs, debts and other long-term costs that help the business function.
Businesses measure recurring expenses to understand the basic operating costs of the
company, which is also an important consideration for investors.

5. Non-recurring Cost - A nonrecurring charge is an entry that appears on a company's

financial statements for a one-time expense that is unlikely to happen again.

6. Direct Cost - Direct costs are the expenses a business incurs directly to make a product or
service, or buy a wholesale product for resale. (All other costs are considered to be indirect
costs.)

7. Indirect Cost - Indirect costs are the costs of running a business and going to market with a
product or service—regardless of the volume manufactured and/or sold. In other words, they
are not directly related to making a product or service, or buying a wholesale product to
resell. (This distinguishes them from direct costs.)

8. Overhead Cost - Overhead costs, often referred to as overhead or operating expenses, refer
to those expenses associated with running a business that can't be linked to creating or
producing a product or service. They are the expenses the business incurs to stay in
business, regardless of its success level.

9. Standard Cost - A standard cost is the budgeted cost of a regular manufacturing process
against which actual costs are compared. Of course, if a new product, service, or process is
to be carried out, the initial standard costs will have to be estimated.
10. Cash Cost - Cash cost is a term used in cash basis accounting that refers to the recognition
of expenses as they are paid in cash. Cash costs are recognized in the general ledger at the
point when cash (or an alternative form of payment) exchanges hands.

11. Book Cost - Book Cost, sometimes referred to as Book Value, is the total cost of purchasing
a security. It includes any transaction charges related to the position (such as commissions)
and is adjusted for reinvested distributions, return of capital, corporate actions and any
subsequent purchases.

12. Opportunity Cost - “Opportunity cost is the value of the next-best alternative when a decision
is made; it's what is given up,” explains Andrea Caceres-Santamaria, senior economic
education specialist at the St. Louis Fed, in a recent Page One Economics: Money and
Missed Opportunities.

13. Sunk Cost - A sunk cost, sometimes called a retrospective cost, refers to an investment
already incurred that can't be recovered. Examples of sunk costs in business include
marketing, research, new software installation or equipment, salaries and benefits, or
facilities expenses.

14. Investment Cost - Investment cost means the actual investment costs/expenses incurred
per project which may include, but not limited to, cost relating to obtaining licenses, land and
land improvements, acquisition and installation of machinery, equipment, furniture and
fixtures.

15. Capital Investment - Capital costs are one-time expenditures on the construction,

enhancement, or acquisition of assets such as equipment and land that will benefit the
project for more than one financial year. The money is necessary to move the project from a
concept to commercialization.

16. Working Capital - Working capital is the money available to meet your current, short-term
obligations. To make sure your working capital works for you, you'll need to calculate your
current levels, project your future needs and consider ways to make sure you always have
enough cash.

17. Operation and Maintenance Cost - The Operation and Maintenance (O&M) cost of a
component is the cost associated with operating and maintaining that component. The total
O&M cost of the system is the sum of the O&M costs of each system component. For most
components, you enter the O&M cost as an annual amount.

18. Disposal Cost - Disposal costs are expenses that are directly related to asset disposal. The
costs can be significant because of the difficulty associated with the disposal of
infrastructure assets. Income and expenses associated with asset disposal are dependent
on whether the assets are sold, demolished, or relocated.
19. Capital - Capital in business refers to the sum of financial assets that are required to
produce goods or services. These funds can be used to initiate operations, meet daily
expenses or grow and expand the business.

20. Equity Capital - Equity capital is funds paid into a business by investors in exchange for
common or preferred stock. This represents the core funding of a business, to which debt
funding may be added.

21. Debt Capital - Debt capital refers to borrowed funds that must be repaid at a later date. This
is any form of growth capital a company raises by taking out loans. These loans may be
long-term or short-term such as overdraft protection.

22. Return On Capital - Return on capital (ROC) measures a company's net income relative to
the sum of its debt and equity value. It is effectively the amount of money a company makes
that is above the average cost it pays for its debt and equity capital.